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  Vincent Grimaldi Can Automakers Make Us Dream Again?
by Vincent Grimaldi de Puget
June 6, 2005

If you ever thought that marketing, finance and engineering were as incompatible as oil and water, think again. The search for competitiveness is forcing us to push marketing fundamentals in every corner of an organization and across its value chain. Those who can't adjust face a sad reality.

The US car industry is a case in point. Here is an example that is going to make financiers and marketers alike shake their head in disbelief. In May, the big news on the financial markets was the downgrade of GM and Ford corporate bonds to "junk"status. Both the magnitude—they have combined borrowings of US$ 453 billion—and the timing of the news are noteworthy, since GM still had one of the top investment grades four years ago and the world economy has been doing moderately well. In sum, this news is only the result of growing pressures that built up over two to three decades.

Forty years ago, GM, Ford and Chrysler were manufacturing nine out of ten cars (including light trucks) sold in the US. GM and Ford combined market share has now fallen to about 42 percent, with no end in sight. Although Chrysler has also been through its ups and downs, its market share has recently been on an upswing, at 13.7 percent.


Simply put, financial analysts are concerned that Detroit has lost its magic touch, leaving the door open for its competition. Toyota, for example, increased its market share from 11.7 to 14 percent in the last year. Every car group—from BMW to Porsche to Nissan—has now invaded the SUV segment, eroding the fat profits of the late 1990s. If light trucks are still profitable, financial results are dragged down by the car segments, under intense competitive pressure in the largest world markets.

It would be simplistic to throw the blame at marketing and sales departments. GM and Ford manage some of the most valuable brands in the world, according to Interbrand and BusinessWeek's annual ranking of best global brands by value. They are also among the top 10 global advertisers, together with Toyota and DaimlerChrysler. The automotive industry is actually the biggest advertiser in the world, with about $20 billion dollars in worldwide media buying.

"Young grads dream of Silicon Valley rather than Detroit"

To understand the reality behind the figures, consider the following two facts that should make any Detroit engineers the happiest recruiters on college campuses: (1) With its 11,000 lakes and long Indian Summer, Michigan is one of the most beautiful regions in North America; (2) Designing a car is much more fun than writing code. Despite the selling point of American car manufacturers, young grads at MIT—a top engineering school—dream of Silicon Valley rather than Detroit, Michigan! Thus, GM and Ford not only compete with Toyota and Renault, but also with Google and Pixar.

It is a fundamental business strategy issue that goes way beyond the boundaries of traditional marketing and sales departments. Detroit appears to have grown out of phase with the global world it contributed to shape. It has been slow to adjust to the deep post-WWII changes caused by the convergence of free trade agreements and information age: capacity excesses, quality differentials, customer service issues, time to market, price discounts, and talent recruiting and retaining. Most of those elements are or should be marketing driven, in a holistic way. Unfortunately, it is a Detroit executive who was quoted as saying "marketing is not a priority for us."

Pointing to the legacy of the past does not provide a satisfactory answer to the competitive lack of the American industry. Many Detroit executives claim that the heavy costs of healthcare and pension plans give them a competitive disadvantage. Those issues—essentially valid—certainly need to be addressed nationwide. However, it should be noted that car manufacturers in Germany, France, the Benelux countries and Japan have also to deal with high labor costs and arcane labor laws. Deep structural changes are happening or will eventually happen in those countries as well.

Not missing the forest for the tree, the fact remains that customers increasingly choose brands traditionally considered as "imports." With the exception of too few hot products, Detroit's sales managers end up "pushing the metal" with deep discounts to consumers and large fleet sales. Both erode profits and brand equity.

It is hard to accept that Detroit could prefer pushing rather than selling its vehicles. People have a truly emotional relationship with their car. They clean it, brush it, groom it and even give it a room in their house. Many if not most marketers would rather sell cars than soap.

In the grand realm of global economics, Detroit was dealt a terrific hand. Despite the hammering, Southern Michigan is still (perhaps today more than ever) the automotive capital of the world. The credit downgrades are disconcerting but the prospect of a lasting turnaround is good. There is however a condition: Marketing emphasis must penetrate every organization, throughout the whole value chain. It is as central as “quality” was in the 1980s and must drive the entire management system with consistency. Cost cutting can only go so far, whereas making us dream shows no limits to driving an organization up.

   Vincent Grimaldi de Puget is a leading brand strategist. He is a partner at GRIFIN PARTNERS, focusing on capital investing and business restructuring, and a visiting professor at US and European business schools.

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